🫨 The Big Blur

With the team behind Kadena closing up shop and OpenSea volume already crashing after its first wave of rewards, there’s never a dull moment in cryptoland.

OpenSea’s recent surge in activity was driven by farmers grinding its rewards campaign, as I wrote earlier this week. Specifically, it was due to general token trading — and not due to a resurgence of interest in NFTs. 

Daily OpenSea token trading volume fell 97% immediately after its first wave of rewards ended, according to this Dune dashboard. 

A week later we’re still seeing much lower volume, even though the second wave of the rewards campaign is already underway. 

Some traders perhaps felt they did not get ROI from the whole farming experience and may now be taking a break. We also saw multiple winners of higher-value NFTs confirm that they were indeed required to provide a US tax form in order to claim their prizes, so those uninterested in doing this may also be opting out of the next wave.

I still don’t think OS’s sudden surge this month will be its new normal. 

But it’s very possible volume may spike again as we approach the end of the second wave of chest rewards, which ends Nov. 15.

— Kate Irwin

Prediction markets aren’t just gambling

Prediction markets are taking over. They’ve become mainstream, and now gambling giants are getting in the fun.

DraftKings is prepping its own prediction market, DraftKing Predictions, which will launch as a mobile app that lets users bet on topics across “finance, culture, and entertainment,” a notable departure from its reputation as a sports betting platform. This week DraftKings announced its acquisition of event contracts firm Railbird Technologies to make it happen.

Web2 financial apps are also prediction market believers. Robinhood has made big gains with its Kalshi integration this year, and last week said it was adding over 100 new event contracts, including some around politics. 

This morning, we also learned that the NHL has struck deals with Polymarket and Kalshi.

Prediction markets are even spreading across crypto apps. This week, Polymarket became available as a mini app within the World Network app. Kalshi previously released its own World mini app back in May.

Crypto wallets like MetaMask and Rabby are integrating Polymarket, too.

Coinbase, if it was so inclined, could possibly integrate Limitless, which uses Base (and which published the tokenomics for its upcoming coin this week). Or, Coinbase could build its own bespoke prediction market from scratch or via an acquisition.

But not everyone’s a fan of the prediction market takeover.

This week, a Kalshi display in NYC showing traders placing bets on who will be the next mayor of the city ruffled some feathers. 

“Everything looks and feels like gambling now. We are cooked,” wrote ad agency exec Michael Miraflor, whose LinkedIn states that he works on Airbnb projects for EssenceMediacom.

“It looks and feels like gambling because it is gambling,” Tribute Labs investor Max Siegman responded. 

Product designer Devon Frohne took it a step further, jokingly suggesting that we’ll vote by rolling dice in the future. 

But within our capitalist economic system, is voting with your dollar on who will win an election just another form of democracy at work? 

In our democracy, we vote to elect leaders, and then watch them do (or not do) their jobs. Often, we’re waiting for an outcome that may or may not happen. You can choose to write to your officials when they fail you, take to the streets in protest, or you could profit off their failures by wagering against them in a prediction market.

Perhaps prediction markets are just another way to participate in our democracy by voting on what outcome we believe is most likely, or our favorite. It’s certainly another way to participate in free financial markets. 

“All they have to do is pick a side,” Limitless CEO CJ Hetherington said of prediction markets in a recent interview. “Picking a side is a fundamental human behavior. We love to pick a side.” 

Robinhood CEO Vlad Tenev doesn’t feel it’s accurate to write prediction markets off as just gambling, even if that may be their primary function.

“Like any new innovation, they don’t fit neatly into any one category,” he said. 

“The disruptor need not be the same animal as what's being disrupted — in fact oftentimes there are significant differences that make the disruptor better and worthy of a new category,” he continued.

“For example, the car disrupted the carriage without being a carriage.”

I’d argue prediction markets are a new type of gambling. But they’re one-upping a dice roll at the casino with another layer of real-world stakes by being tied to real events. 

More knowledge can equal more power, but there’s also the risk that certain bets may be subject to insider trading. 

Gambling more broadly is on the rise via sports betting, which has sparked concerns about a spike in gambling addictions, especially among younger individuals. 

Psychiatrists warn that betting impacts your brain’s dopamine levels. Dopamine is actually released regardless of whether you win or lose, making the whole experience addictive.

But the line between Web2 financial apps, crypto and gambling will likely continue to blur. Prediction markets are raking in the cash. There’s already obvious overlap between crypto trading and gambling, and now we’re seeing traditional financial trading merge with crypto, too, via things like stablecoins and what Robinhood’s exploring with stock tokens. 

Kraken’s even trying to poach US stock traders by offering USDC rewards for migrating over to its trading app.

The rise of prediction markets signals more than just a rise in gambling — it’s confirmation that TradFi, crypto and gambling companies are perhaps all, to varying degrees, one and the same.

Fidelity investor Peter Lynch once shared a TradFi investment approach that echoes what prediction markets have ultimately become:

“You have to say to yourself, ‘If I’m right, how much am I going to make? If I’m wrong, how much am I going to lose?’ That’s the risk/reward ratio.”

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